Newspaper ownership and the fourth generation syndrome

There are still a few family-owned newspapers in America, but only a few. Most were gobbled up by corporate consolidators -- newspaper chains -- decades ago. The reason, I think, has to do as much with the dynamics of a family business as with corporate finance and the peculiarities of newspapering.

There are four cycles in the life of a family business. Often they align with generations:

The pioneer founder. In newspapers, this role often was played in the late 19th century. The founder may not have actually started the business; he -- and it always was a man in those days -- may have stepped in and picked up one or two poorly run newspapers. The founder was unabashedly a booster, a city builder, a civic leader.

The empire builder. This generation may take risks to grow the business, perhaps acquiring other newspapers, perhaps starting related businesses. As broadcast licenses became available in the 20th century, many of this generation snapped them up (until the government ruled out "cross ownership."

The consolidator. This generation in some ways focuses on cleaning up the wonderful mess created by the previous one -- turning chaos into a focused, professionally operated enterprise. MBAs are brought in.

The wastrel. It's a cruel label, but how often have you seen it happen? Unlike the previous generations, this one didn't grow up working in the family business, but rather grew up spending the family money. By the time you get to four generations, there are too many heirs to coordinate, to manage, to employ. Most have little or no real interest in the business itself, but a great deal of interest in a Mercedes-Benz or a Porsche or a stable of race horses or even a yacht in Florida stocked with girls and cocaine. (I could, but won't, name real examples.) This is the generation that typically sells out to a corporate buyer.

It doesn't have to be this way, and sometimes it isn't.

Sometimes the founder is also the empire builder, like Hearst (although he started out with daddy's money). Sometimes the empire-building drive is weak, but the "well-run business" drive is strong. Often someone in the fourth generation loves and understands the business, and takes on the heavy burden of holding the company together and dealing with all the relatives. Some families have figured out how to handle the problem of too many uninterested heirs holding tiny chunks of the business.

But the cards are stacked against a family business holding together over time. And, as I said, it's not specifically a newspaper phenomenon; I could cite examples in family farming, consumer products and pharmaceuticals.

This story arc played out across America in a way that happened to feed the growth cycle of corporations like Gannett, which gobbled up individual family-owned newspapers and smaller, family-dominated chains in the 1960-1980 period. And it is one of many factors that led to today's problem: Giant highly leveraged, generally public corporations caught in an economic trap that could bring about the wholesale collapse of the newspaper industry.

Comments

Great to read a refreshingly concise reminder of business/social history. Understanding the past is critical to growing the future how ever it shapes up. I think we're beyond the ``wondering'' about newspapers' future models and actually transforming into the new media/journalistic world. Between folks like rev2oh, Howard Owens at The Batavian and many many others, this first wave of innovation is coming at a crazy time, but welcomed......
The new ``owners'' will be more like the Pioneer Founders.......
Cheers

I think you're absolutely right that we're seeing new pioneer founders.

Technology has lowered the capital requirements for starting a media business. Today's local Web startups are the equivalent of the 19th century printer with "a shirtfull of type," a California job case, and a flatbed press, who came to town and set up a print shop that turned into a newspaper company.

In fact, the capital requirements have been driven to near zero. You can rent servers and pretty much everything else you need. Drupal is free. OpenX is free, and available as a service. Pretty much all your startup costs are related to labor and marketing.

Everything runs on a faster clock now, and we may continue to see those four waves, but I doubt they'll be tied to generations.

Steve:
This is good, but a bit of an unfair generalization--in fact, the third and fourth generation members of newspaper families I know are smart, terrific (and notably humble) business people who often are hipper to the changes the business faces than their parents were. There's another significant factor in the fourth generation that you only glanced upon: The monetary rewards are different. The earlier generations own significant shares; the later generations usual see only dividends from the business. In newspaper dynasties I've covered and known, the breakdown often happens in the fourth generation because a far-flung set of cousins forces a sale to get the direct benefits of that ownership stake rather than merely collect paltry dividends on it.